Abbott v. Chesley
2013 Ky. LEXIS 367
| Ky. | 2013Background
- Fen-Phen settlement funds were obtained for 431 Kentucky claimants represented by CGM under contingent fee contracts.
- CGM allegedly breached fiduciary duties by taking excessive fees and diverting funds to KFHL and themselves, contrary to fee agreements.
- Class decertification and settlement allocated funds; appellants were not informed of terms or allocations and received only a portion of their recoveries.
- The Fayette Circuit Court initially filed suit; venue was transferred to Boone Circuit Court; appellants later sought transfer back to Fayette.
- Trial court granted partial summary judgment against CGM for breach of fiduciary duty and ordered damages; Mills’ documented expenses were disputed.
- Court of Appeals reversed on breach issue, but this Court reversed and reinstated summary judgment against CGM and approved joint and several liability, with remand on several remaining issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did CGM breach fiduciary duties by charging excessive fees? | Appellants argue CGM violated fee contracts and fiduciary duties by taking more than allowed and misallocating funds. | CGM contends a class action/common fund approach allowed greater discretion in fee allocation. | Yes; summary judgment against CGM for breach of fiduciary duty. |
| Should damages be joint and several against CGM? | Appellants seek joint and several liability based on a joint enterprise. | CGM argues damages should be apportioned severally per KRS 411.182 for torts. | Damages properly joint and several due to joint enterprise and contract-based breach. |
| Was the Boone County venue denial to transfer back to Fayette properly decided? | Appellants contend Boone should transfer back to Fayette for convenience and proper venue. | Boone court exercised discretion; transfer back was not mandatory and issues of venue are nuanced. | Yes; Boone County did not abuse discretion in denying transfer back. |
| Was Mills’ claimed litigation expenses deduction proper at summary judgment? | Expenses were unsubstantiated overhead and not properly attributable to the Guard case. | Expenses were per Mills’ agreement to be paid upfront and reimbursed from fees. | No; the deduction was improper at summary judgment; remand for fact-finding on validity of expenses. |
Key Cases Cited
- Daugherty v. Runner, 581 S.W.2d 12 (Ky.App. 1978) (attorney-client fiduciary duties; higher duty as an officer of the court)
- Clark v. Burden, 917 S.W.2d 574 (Ky. 1996) (fiduciary duties; attorney honesty and loyalty)
- In re Sallee, 286 F.3d 878 (6th Cir. 2002) (fiduciary duty is the highest order of duty)
- Jones v. Nickell, 179 S.W.2d 195 (Ky. 1944) (joint enterprise/ad hoc partnership with shared profits and control)
- Roethke v. Sanger, 68 S.W.3d 352 (Ky. 2001) (joint enterprise elements; partnership-like liability)
- Kenseth v. C.I.R., 114 T.C. 399 (Tax Ct. 2000) (contingent-fee economics; overhead vs. direct expenses)